U.S. v. Wilfred American Educational Corp., 91-1084

• Decision Date: 07 November 1991
• Docket Number: No. 91-1084,91-1084
• Citation: 953 F.2d 717
• Parties: 72 Ed. Law Rep. 63 UNITED STATES of America, Appellee, v. WILFRED AMERICAN EDUCATIONAL CORPORATION, Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 717

953 F.2d 717

72 Ed. Law Rep. 63

UNITED STATES of America, Appellee, v. WILFRED AMERICAN EDUCATIONAL CORPORATION, Defendant, Appellant.

No. 91-1084.

United States Court of Appeals First Circuit.

Heard Nov. 7, 1991.

Decided Jan. 9, 1992.

Thomas E. Peisch with whom Andrea L. Rocanelli, Conn, Kavanaugh, Rosenthal & Peisch, Boston, Mass., Hughes, Hubbard &amp Reed, David A. Lombardero and William R. Stein, Los Angeles, Cal., were on brief for defendant, appellant.

Ralph C. Martin II, Asst. U.S. Atty., with whom Wayne A. Budd, U.S. Atty., Boston, Mass., was on brief for appellee.

Before BREYER, Chief Judge, SELYA and CYR, Circuit Judges.

CYR, Circuit Judge.

Defendant-Appellant Wilfred American Educational Corporation ("Wilfred") was convicted and sentenced on nine counts of mail fraud under 18 U.S.C. § 1341. ¹ On appeal, Wilfred claims that the maximum preguidelines fines imposed by the district court are invalid due to procedural irregularities. We affirm.

I

DISCUSSION

A. Imposition of Fines

Wilfred claims that all nine fines must be set aside because the district court did not comply with 18 U.S.C. § 3622(a) ("Factors relating to imposition of fines"), which allegedly required the sentencing court to consider Wilfred's ability to pay a fine, the impact a fine would have on Wilfred's creditors, students and employees, and the remedial measures taken by Wilfred to prevent future wrongdoing. ² Since the repealed version of section 3622(a) on which Wilfred relies was inapplicable to all counts of conviction except count 10, see supra note 1, we summarily dismiss Wilfred's claims as to the other eight counts.

At sentencing, the district court had before it the presentence investigation report ("PSR") and the sentencing memoranda submitted by Wilfred and the government. The PSR contained financial data provided by Wilfred, detailing its assets, liabilities, income, and expenses. Wilfred's sentencing memorandum and the accompanying letter and affidavits are replete with representations and documentary exhibits bearing on Wilfred's ability to pay a fine, the plight of its creditors in its pending chapter 11 proceedings, and the organizational changes Wilfred effected following its indictment. The government's sentencing memorandum also addressed Wilfred's financial situation, and the accompanying affidavits attested to Wilfred's continuing fraudulent activity.

We will not presume that the district court declined to consider the relevant section 3622(a) evidence contained in the record. See United States v. Condon, 816 F.2d 434, 436 (8th Cir.1987) ("In light of the available information and absent a record showing that the district court refused to consider the § 3622(a) factors, we will not find the sentence to be an abuse of discretion."). Moreover, our review reveals that the district court did consider all the materials submitted before and during the sentencing hearing. The court entertained extended argument from counsel relating to all aspects of Wilfred's past, current and anticipated financial circumstances, the effect a fine would have on innocent parties, and the remedial measures assertedly undertaken by Wilfred. In the end, the court suspended execution of the fine for one year, or until the entry of an order of relief under chapter 7, whichever came first. ³ The record thus demonstrates that the district court considered the relevant factors delineated under section 3622(a).

Wilfred contends, nevertheless, that the court was required to make specific oral or written findings relating to these factors. In United States v. Penagaricano-Soler, 911 F.2d 833, 846-47 (1st Cir.1990), which likewise involved a challenge to the imposition of a fine, we declined to decide whether section 3622(a) requires specific findings. We now join the majority of courts of appeals and hold that specific findings, however helpful to the reviewing court, are not mandated by section 3622(a). United States v. Hooshmand, 931 F.2d 725, 737-38 (11th Cir.1991); United States v. Wright, 930 F.2d 808, 810 (10th Cir.1991); United States v. Weir, 861 F.2d 542, 545 (9th Cir.1988), cert. denied, 489 U.S. 1089, 109 S.Ct. 1555, 103 L.Ed.2d 858 (1989); Condon, 816 F.2d at 436; but see United States v. Harvey, 885 F.2d 181, 182-83 (4th Cir.1989) (specific findings required). As the record in the instant case enables adequate appellate review, Wilfred's section 3622 claim fails.

B. Rule 32(c)(3)(D) Claim

Wilfred contends that the district court contravened Federal Rule of Criminal Procedure 32(c)(3)(D) by failing to make a finding as to the accuracy of the financial data Wilfred originally provided to the probation office for inclusion in the PSR. ⁴ The financial information (as at September 30, 1990) originally submitted by Wilfred was incorporated in substantial part in the PSR. Thereafter, on January 7, 1991, Wilfred submitted an updated balance sheet (as at October 31, 1990) as an exhibit to the Menkes affidavit which accompanied Wilfred's sentencing memorandum. ⁵ Additionally, counsel to codefendant Wilfred Academy, purporting to speak on behalf of Wilfred at sentencing, brought the October 31 balance sheet to the attention of the district court. When the court commented about Wilfred's current assets and liabilities counsel to Wilfred Academy "corrected" the court's figures, which were based on the September 30 balance sheet, explaining that the September 30 balance sheet was inaccurate because "some of the assets had to be restated because they ... did not really exist, as a practical matter...." ⁶

Wilfred's claim ignores the rule 32(c)(3)(D)(ii) dispensation that no finding is required as to the accuracy of challenged presentence report information where the court determines that "the matter controverted will not be taken into account in sentencing." Confronted with two unaudited balance sheets which the court supportably found lacking in reliability, see supra note 6, and faced with conflicting interpretations of the financial data, the district court understandably opined, "[t]he longer I sit here, the less confidence I have in balance sheets...." Wilfred's own counsel even embellished: "I agree with you that the numbers can say anything they want...." Thus, the district court decided to disregard the conflicting balance sheets due to its well-founded and unchallenged skepticism as to their reliability as a means of determining Wilfred's ability to pay a large fine at the time of sentencing. Rather than attempt to determine Wilfred's precise current financial condition from the financial information submitted by Wilfred, the court prudently preferred to recognize Wilfred's uncertain financial future, as evidenced by the pending chapter 11 proceedings, and suspended execution of the fine for one year, or until an earlier order for relief under chapter 7: "If you are still in business a year from now, it would seem to me the company is in a position to make that payment." The district court thereby expressly determined, in substantial compliance with rule 32(c)(3)(D)(ii), not to rely on the disputed financial information in sentencing Wilfred. See, e.g., United States v. Wells Metal Finishing, Inc., 922 F.2d 54, 58 (1st Cir.1991); United States v. Gerante, 891 F.2d 364, 367 (1st Cir.1989); United States v. Bruckman, 874 F.2d 57, 64 (1st Cir.1989) (implied findings on disputed factual questions satisfy rule 32(c)(3)(D)). ⁷

Wilfred further contends that section 3622(a)(3) required the court to consider the balance sheets in imposing sentence, thus the court could not comply with rule 32(c)(3)(D) without making a finding as to the alleged factual inaccuracy of the September 30 balance sheet. On the contrary, section 3622(a) merely required the court to consider Wilfred's income, earning capacity and financial resources. The court was not required, either under section 3622(a) or otherwise, to accept the financial information presented by Wilfred. As already discussed, the court carefully considered Wilfred's financial condition, supportably found it uncertain, and suspended execution of the fine for one year pending further developments in Wilfred's reorganization proceedings. The decision not to credit Wilfred's dubious, self-serving financial information contravened neither section 3622(a)(3) nor rule 32(c)(3)(D).

C. Campbell Affidavit

Wilfred was convicted of mail fraud based on false documentation relating to the PELL Grant and Student Guaranteed Loan programs administered by the U.S. Department of Education. Wilfred's sentencing memorandum informed the district court of certain organizational changes Wilfred allegedly implemented after its indictment, in order to prevent recurring fraud. The government's sentencing memorandum alleged continuing post-indictment misconduct by Wilfred. One of the government's supporting affidavits was provided by LaRoss C. Campbell, an auditor with the Office of Inspector General at the Department of Education ("OIG") who had headed an OIG investigation conducted at Wilfred's New York City offices between August 7 and September 20, 1990. With Wilfred's full knowledge and cooperation, the OIG inspection team, headed by Campbell, reviewed the records of codefendants Wilfred Academy and American Business Institute, Wilfred's wholly-owned subsidiaries. The Campbell affidavit attests that the OIG inspection disclosed a significant number of Title IV student loan violations, many of which occurred after 1989.

The Campbell affidavit was filed with the court on January 7, 1991, the day before the sentencing hearing. At sentencing, the court inquired whether Wilfred had seen the Campbell affidavit. Wilfred's counsel stated that he had received a copy on the previous evening. Wilfred's counsel proceeded to respond to the affidavit, challenging its significance and urging the court to disregard it because "[i]t's got nothing to do with this case." Although Wilfred expressed strong...